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Who's the Employer?

Answers are provided by S. Derrin Watson, JD, APM

Illegal Aliens and the Supreme Court

(Posted June 24, 2002)

Question 205: In Q&A 100, you concluded that illegal aliens should be considered employees and participants of a qualified 401(a) plan even though they are not employed legally. Does the Supreme Court opinion in Hoffman Plastic (122 S. Ct. 1275, 3/27/02) change your opinion?

Answer: Hear Ye! Hear Ye! The Supreme Court of this column is now in session! Mr. Watson will read the opinion of the Court.

The Hoffman case does not change my understanding of the situation. Hoffman dealt with several workers laid off in retaliation for their union organizing activities. The layoffs were a violation of labor law. The National Labor Relations Board (NLRB) ruled for the workers and concluded that they were entitled to back pay. The NLRB ruled that even though one of the workers was not in the country legally, and was not entitled to work in this country legally, he was entitled to receive back pay.

The Supreme Court held that the NLRB, in fashioning remedies, has to look at other U.S. laws besides labor law. Because the alien's work would have involved criminal acts (either falsifying documents or illegally hiring someone not allowed to work in the country), back pay for that work was inappropriate.

I see a real difference between back pay and retirement plan contributions. Back pay is awarded not because there was a contract with the worker to give him the pay, and not because the worker actually worked and earned the money, but rather because the employer has broken the rules and needs to be punished. The opinion discusses the effect of back pay as a sanction to deter illegal conduct by employers.

Retirement contributions, on the other hand, are part of the employment contract between the company and its workers. They are part of the pay a worker receives for performing services.

It is a long way from saying that an illegal alien is not entitled to payment for work he never did to saying that he is also not entitled to full payment for the services he actually rendered. Would an employer be justifying in not giving a (final) paycheck to a worker he learns supplied false documentation and is actually in the country illegally? I don't think so, and I don't think that is what the Supreme Court is suggesting. Then why would it be appropriate for that employer to withhold the deferred compensation that the employee had earned?

The Court will now adjourn. Be upstanding!

Important notice:

Answers are provided as general guidance on the subjects covered in the question and are not provided as legal advice to the questioner or to readers. Any legal issues should be reviewed by your legal counsel to apply the law to the particular facts of this and similar situations.

The law in this area changes frequently. Answers are believed to be correct as of the posting dates shown. The completeness or accuracy of a particular answer may be affected by changes in the law (statutes, regulations, rulings, court decisions, etc.) that occur after the date on which a particular Q&A is posted.